MANILA, Philippines—If current COVID-19 quarantine restrictions drag on until end of 2021 and mass vaccination lags behind, the Philippine economy cold eke out only a 2.9 percent growth, according to economists at the Ateneo de Manila University on Thursday (Jan. 21).
Citing technical projections of the Ateneo’s economics department, former socioeconomic planning secretary Cielito Habito told an online seminar that he expects the “painful” recession to end in the second quarter of 2021 even as restoring GDP to pre-pandemic levels was likely to take much longer—three or more years beyond President Rodrigo Duterte’s tenure which ends middle of 2022.
Ateneo economists projected GDP to have shrunk by 9.3 percent during the fourth quarter of 2020—barely missing another double-digit drop—to end the year with a 9.8-percent contraction. If this pans out, it would be the Philippines’ worst recession post-war and a worse outturn than the government’s estimate of 8.5-9.5 percent decline.
The recession was seen spilling over to the first quarter of 2021 with a narrower 1.8-percent year-on-year GDP contraction, before posting 3.7-percent growth during the second quarter partly as a result of the low base coming from the record 16.9-percent drop in economic output in 2019.
While Ateneo economists expect GDP to further expand by 4.7 percent and 5.1 percent in the third and fourth quarters, the estimated 2.9-percent growth for the entirety of 2021 would be a far cry from the government’s conservative target of 6.5-7.5 percent expansion.
Ateneo economics department chair Luis Dumlao explained that these figures were baseline numbers if most parts of the country would remain under general community quarantine (GCQ), which still restricted gatherings and movement of mass numbers of people as well as provision of some nonessential goods and services to prevent COVID-19’s further spread.
Habito said he was worried that a resumption in quicker virus transmission may dampen efforts toward economic rebound—data compiled by Dumlao showed a quicker increase in the number of COVID-19 cases as well as deaths during the first few weeks of 2021.
Dumlao said that while the increase in infections had been slowing since July of last year, a quicker pattern was observed following the Christmas holiday season and major religious gatherings in January this year.
If consumer spending cannot rebound in case coronavirus spreads faster again, coupled with another more contagious variant posing a threat, Habito said the Philippines’ economic recovery would be “U-shaped” at best, wherein the period between recession and positive growth will be prolonged.
Habito warned that the economic rebound may also be “W-shaped”—with sharp and repeated ups and down—at worse, in case the new variant entailed another round of lockdowns.
It did not help that the national government seemed to have faltered in quickly accessing COVID-19 vaccines to inoculate the population and achieve herd immunity, Habito added.
While the agriculture sector was leading recovery from pandemic-induced recession with growth posted in previous quarters before a string of strong typhoons could have damped performance during the fourth quarter of 2020, investment and consumption had been lagging behind.
For Habito, business and consumer confidence must be revived so people can spend again and prop the economy.
To do this, Habito said the government needed to put money in people’s pockets, and not much so in banks, where oozing liquidity has yet to spill over to the real economy.
But even so, Habito said while some people currently have the money, the pandemic forced them to keep their cash and save them in the meantime while uncertainty abounds.
Habito added that it was an “urgent imperative” to restore public transportation systems as the lack of mass transport had been the primary reason for lower demand for goods and services.
While the government’s massive infrastructure push under its “Build, Build, Build” program had the best intentions to create jobs and ramp-up public spending, Habito pointed to the same-old problem of implementing agencies’ slow absorptive capacity to disburse for big-ticket projects.
Citing the latest Commission on Audit (COA) reports, Habito lamented that the Department of Public Works and Highways (DPWH) and Department of Transportation (DOTr) were able to spend just one-third and one-fourth of their respective agency budgets during the past three years.
As supply pressures may stay longer and affect consumer prices, Habito expects an uptick in inflation to 3-4 percent this year from 2.6 percent in 2020.
And as economic recovery stayed muted, Habito projected employment to slightly ease to 7-9 percent in 2021 from a 15-year-high of 10.4 percent in 2020.